What happens to a contract if one party faces a mutual mistake?

When one party faces a mutual mistake, the appropriate legal principle is that the contract is voidable at the discretion of the affected party. A mutual mistake occurs when both parties share a misunderstanding about a fundamental aspect of the agreement. In this case, the law allows the party who is adversely affected by the mutual mistake to choose not to be bound by the contract, effectively making it voidable.

This approach seeks to ensure fairness by recognizing that both parties entered into the agreement under a shared misconception that materially impacted their obligations or benefits under the contract. If the affected party opts to void the contract, the contract is rendered unenforceable. The option indicating that the contract becomes invalidated automatically is not accurate, as it requires a decision from the affected party to void the agreement. Similarly, stating that the contract remains enforceable due to mutual consent overlooks the fact that the error undermines the very basis on which consent was given. Lastly, suggesting that the contract becomes renegotiable does not reflect the legal nature of the situation; rather, it is the choice of the affected party to void the contract rather than renegotiate it.